Funding strategies for sustainable growth of standalone Credit- Only Microfinance Institutions in Harare, Zimbabwe

Abstract

The study focussed on the investigation of the funding strategies for promoting the sustainable growth of Standalone Credit-only Microfinance Institutions (SCOMFIs) in Harare. SCOMFIs are not owned by big institutions and their license prohibits them from taking deposits. The major objective of the study was to determine the strategies for improving the funding access of the standalone Credit Only Microfinance Institutions in Harare. SCOMFIs lack strategic alliances that can facilitate easy access to funding and often fail to secure affordable lines of credit from existing funding options for financing their loan book growth, capital, and operational expenditures. The study was motivated by this funding problem which had long constrained the growth of these Microfinance Institutions in Zimbabwe. The matter is substantial as the entities form 89% of players in the sector. Data was gathered using web-based structured survey questionnaires that were administered virtually to 85 respondents and had 82% response rate. Reliability of the tool was adjusted through inspection to Cronbach Alpha coefficient of 0,738 which was within the acceptable range for the conventional standards for reliability. The study employed a 5-point Likert scale type questions and the data was analysed using SPSS version 16. The data was cleaned in SPSS and was transformed into five variables namely Funding Access, Organizational goals, MFI Innovation, Organizational performance, and Corporate Governance. Funding Access was the dependent variable while the other four variables were independent variables. A normality test was conducted, and variables were assessed using Shapiro Wilk figures as sample size was below 100. The data followed a normal distribution and the study employed parametric tests. Pearson’s correlation was used to test association between independent variables and funding access. Empirical evidence suggests that the organizational goals and innovation within the Microfinance Institutions had a positive and statistically significant association with funding access at 5% significant level. Organizational goals and MFI innovation had a positive and statistically significant impact on the funding access. MFI goals had more influence on improving funding access than innovation. The findings helped in developing the funding strategy model whose variables explained about 43% of the funding access. The model was explained as Funding Access(Y) = 1.516 + 0,458 Organizational Goals + 0,089MFI Innovation which showed that organizational goals and innovation of the MFIs play a critical role and should form strategic pillars of the MFI funding strategy. The study recommends Microfinance policies that promote innovation capacity and good strategic focus to unlock funding. The policies should attract public and private sector funding to address the funding gap in the sector.